Aliging Profit with Purpose - Global Goals Yearbook 2019

FINANCING COMMON PROSPERITY
ronmental responsibilities in addition to economic returns.
Investors and analysts can also send a powerful signal by
asking annual follow-up questions on the key environmental
and social issues affected by companies.
We are also beginning to see an increase in shareholder votes
by large asset managers such as BlackRock, State Street, Fidelity,
and Vanguard that demand more climate-related disclosures
from companies. For example, ExxonMobil responded to 62
percent of shareholders’ requests to increase transparency in
the company’s report around risks related to climate change.
Likewise, Shell responded to pressure from Climate Action
100+ – a coalition of 340 global investors that controls more
than $34 trillion in US assets – to set leading targets in the
energy sector for climate goals linked to executive pay.
Publicly listed companies are also under increasing pressure
to disclose their business risks to climate change. Earlier this
year, the Task Force on Climate-related Financial Disclosures
(TCFD) reported that 785 companies and other organizations
– including 374 financial firms with collective assets in excess
of $118 trillion – were committed to supporting the
TCFD, demonstrating a dramatic rise in support for increased
disclosure just two years after the task force was launched.
Companies are getting the message. Some 51 percent of companies
now discuss climate change risks in annual financial
filings, compared to 42 percent in 2014. However, the 32
percent of companies that do disclose climate risks in their
10-Ks are only looking at it from the angle of mitigating
regulatory risk.
Boards are also holding their companies to account. Strong
executive- and board-level attention to – and prioritization
of – sustainability is key to success. Setting public goals is
essential: Companies are much less likely to fail on public
goals than internal ones. According to Ceres, companies
that have both board oversight of their sustainability initiatives
and link their executive compensation to sustainability
oversight are over two times more likely to have emissions
reduction targets. Yet, whereas 62 percent of companies have
some form of oversight for sustainability at the board level,
only 13 percent have strong oversight practices that include
board mandates and regular reports on sustainability from
management. Moreover, whereas 65 percent hold senior-level
executives accountable for sustainability performance, only 8
percent link executive compensation to sustainability issues
beyond compliance.
A growing body of research indicates that creating executive
incentives for sustainability is effective in boosting those firms’
efforts on environmental and social concerns.
5. Conclusion
When it comes to climate change and environmental degradation,
business as usual is no longer an option. The private
sector can move at the speed and scale necessary to address
these issues. However, companies need to broaden their efforts
beyond climate to include biodiversity and ecosystem
loss. To make business truly sustainable, we need to establish
incentive structures that ensure sustainability is synonymous
with good business.
Global Goals Yearbook 2019
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